SERC expects leaner, meaner Budget 2019
> Research centre says it will, however, be growth supportive; cuts 2018 GDP growth forecast to 4.8%
PETALING JAYA: The Socio-Economic Research Centre (SERC), having cut its full year gross domestic product (GDP) growth forecast to 4.8% from 5.2%, expects a leaner and meaner but growth supportive Budget 2019.
Its executive director Lee Heng Guie said that the government is likely to cut allocations for both operating and development expenditures.
Besides emoluments, debt services and pension which are fixed components of the opex, the government might be weighing on areas where it can cut its spending or rationalise expenditure.
On development expenditure, Lee said the mid-term review of the 11th Malaysia Plan could provide a guidance on how this will materialise in the coming Budget.
Additionally necessary yet unpopular fiscal restoration measures and new taxes such as soda tax could also help plug the large financing gap in the budget.
The focus of this upcoming budget according to Lee, is likely on rationalising fuel subsidies and cost saving in terms of procurement while cost of living aid is likely to be reviewed to make it conditional.
He added that corporate tax and individual income tax are unlikely to be increased.
Drawing reference to Pakatan Harapan’s alternative Budget 2018 when it was the Opposition, Lee said the now ruling coalition had touched on inheritance tax and capital gain tax on share transaction as some of its considerations, but kept it as last resorts.
Lee however cautioned against tightening the purse strings too much, due to unfavourable external environment which is also not supportive of growth. Easing cost of living
SERC WISHLIST FOR BUDGET 2019
Tax relief for rental; tuition fees for primary and secondary; separate tax relief for EPF contribution and life insurance. Discount on food card at eateries operated by GLC’s. Reintroducing RM100 monthly pass for unlimited LRT and bus rides. Incentivising rent-to-own scheme. Strict price surveillance and enforcement.
Liberalise 30% of GLC procurement for non-bumiputra. Re-plough foreign workers Levy to Industrial Adjustment Fund to support automation and technology upgrading. Review of Approved Permit to avoid rent seeking.
SERC itself is proposing for an independent panel to be set up to review cost of doing business, streamlining regulatory practices and compliance cost and eprocurement and e-services system given the amount of government contract awards exceeding over RM100 billion each year.
Budget 2019, to be tabled on Nov 2, will be the first by the Pakatan Harapan government.
Meanwhile on GDP growth, Lee said the revision is in line with Bank Negara Malaysia’s revision of full-year growth forecast from 5.5%-6% to 5%.
Taking on a cautious approach on growth prospects for the remainder of the year and 2019, the think tank said the revision was due to the contraction in private investment as a result of deferment and cancellation of mega projects as well as the escalation of the trade war between US and China.
Private investment growth is expected to dampen to 3.9% for the full year from 9.3% in 2017 before rebounding to 4.1% in 2019.
The 2019 GDP forecast has also been revised to 4.7% from 4.9% previously.
The ringgit is expected to settle at RM4.15 to the greenback by year-end on the back of policy clarity on fiscal and debt path, strong fundamentals and affirmations of Malaysia’s sovereign ratings despite external headwinds.
While Malaysia is likely to hit the fiscal deficit target of 2.8% this year, it may see a higher deficit at 3% next year due to revenue shortfall.